Fuel prices to cut Qantas profits - Breaking News - Business - Breaking News

National carrier Qantas Airways has forecast that its profits will fall by more than a quarter in 2005/06 amid record high fuel prices.
Qantas chief executive Geoff Dixon has also warned that more cost cutting will be necessary if fuel prices remain at current levels.
Up to 30 jobs will go after Australia's biggest airline decided against the sale of its catering business in favour of restructuring.
Mr Dixon forecast that Qantas will post a pre-tax profit of around $670 million for 2005/06, after restructuring costs of approximately $153 million.
That represents a 27 per cent decline on 2004/05's $914.3 million profit before tax.
It is also at the bottom end of analysts' forecasts, which ranged between $670 million and $895 million for pre-tax profit after restructuring costs.
Qantas had previously warned that it would not achieve the same level of profitability in the current financial year as in 2004/05.
"This position has been reinforced by a $1 billion increase in fuel costs for 2005/06 after hedging, a significant amount of which will not be covered by surcharges," Mr Dixon said.
Last August, Qantas reported a net profit of $763.6 million for 2004/05.
Its net profit for the first half of the current year fell 9.6 per cent to $352.6 million on the back of soaring fuel costs and redundancy payouts.
Qantas, which lifted its fuel surcharge on tickets in April in response to rising fuel costs, has said its 2005/06 fuel bill is expected to reach $2.9 billion this financial year - about $1 billion higher than for 2004/05.
Qantas has been undertaking a $3 billion restructuring program to offset the negative impact of rising jet fuel costs caused by record high world oil prices.
Mr Dixon said Qantas was making solid progress towards its target of $3 billion of benefits through its 'Sustainable Future' program for the five years to June 2008.
"These reforms will lead to an improved cost structure in future years," he said.
"However, if fuel prices continue at this level, further restructuring will be required."
Mr Dixon also said Qantas had decided not to sell its catering operations, the expected proceeds of which had been included in its 2005/06 forecast.
"The offers we received for our catering business did not represent good value compared to the benefits we expect to achieve by retaining the business and restructuring it," he said.
The restructure of Qantas catering is initially expected to provide improvements in earnings before interest and tax (EBIT) in excess of $15 million per annum.
Qantas executive general manager associated businesses, Grant Fenn, said the restructure of the catering facilities would initially focus on QFCL Sydney at Qantas' Sydney Jetbase and Caterair Sydney at Mascot Airport.
"Over the next nine months, we will reorganise the work by concentrating all client airline catering services in one facility and all Qantas catering services in the other," he said.
"As many as 30 redundancies may be required but we expect these will all be achieved through expressions of interest."
Mr Fenn said the restructure of Qantas' five other flight catering centres in Melbourne, Brisbane, Perth, Adelaide and Cairns would also commence immediately.
However, Qantas' Brisbane-based Snap Fresh business would not be affected by the changes.
Qantas shares had lost nine cents or 2.8 per cent to $3.09 by 1220 AEST.
© 2006 AAP